SEI Q3 2026 Earnings: Operating Margin Expands Despite a One-Time Charge

SEI Investments (NASDAQ: SEIC) reported Q3 2026 revenue of $662.0 million, up 14% year over year, while GAAP diluted EPS rose 6% to $1.38 from $1.30. Operating income increased 24% and the GAAP operating margin reached 30%, while adjusted diluted EPS advanced 24% to $1.64. A $32.5 million Stratos-related termination charge limited attributable net income growth to 2%, creating a notable gap between operating performance and GAAP earnings.

Core Results

Revenue growth and lower corporate overhead helped operating income rise faster than the top line. Corporate overhead declined 16% to $36.1 million, although SEI also recorded $6.4 million of additional incentive compensation expense related to year-to-date performance and its outlook for the rest of the year.

Adjusted operating margin reached 31%, which SEI said represented a 260-basis-point year-over-year improvement based on unrounded figures. Adjusted results exclude specified acquisition-related items and other unusual charges.

Business and Segment Performance

Private Banks produced the strongest operating leverage, with operating profit rising 38% on 11% revenue growth as professional-services adoption increased. Investment Managers maintained a 39% margin as previous sales converted into revenue and demand for outsourcing remained firm.

Investment Advisors generated the fastest revenue growth, but expenses rose 36%, causing its operating margin to decline to 41% from 46%. Institutional Investors remained the only established segment with lower revenue and operating profit.

Stratos contributed $23.3 million of Investment Advisors revenue and $4.4 million of operating profit, with the results including $7.3 million of acquired-intangible amortization. Excluding Stratos, Advisors revenue increased 10% and operating profit grew 7%. The integrated cash program contributed $20.8 million, unchanged from the prior-year quarter.

Sales Activity and Asset Trends

Third-quarter sales events totaled $46.8 million, the second-highest quarterly amount in SEI’s history, bringing the year-to-date total to $157.4 million. Investment Managers contributed $32.0 million, Private Banks generated $12.6 million, Investment Advisors added $2.4 million, and Institutional Investors recorded negative $2.3 million.

Ending assets under management were $606.4 billion, down 0.1% from Q2 as market values and net flows were little changed. SEI said assets under administration, assets on platform, and assets under advisement increased 4% during the quarter, primarily because of Investment Managers mandate funding and additional client capital deployment. Total managed, advised, or administered assets reached approximately $2.1 trillion.

LSV assets declined 1% sequentially because strong investment performance did not fully offset $5.3 billion of net outflows. SEI’s share of LSV performance fees was $4.5 million for the quarter.

Profitability, Cash Flow, and Balance Sheet

SEI reported $565.3 million of operating cash flow for the first nine months of 2026, not Q3 alone, compared with $481.3 million in the corresponding 2025 period. That represents an increase of approximately 17%. Cash and cash equivalents were $399.8 million at September 30, essentially unchanged from December 31, 2025, while current and long-term debt totaled approximately $36.7 million.

During Q3, SEI repurchased 2.0 million shares for $215.1 million at an average price of $105.24 per share. The resulting 3% reduction in share count helped diluted EPS grow faster than attributable net income. On October 20, the board added $800 million to the repurchase authorization, bringing the available capacity to approximately $926 million; the authorization itself does not specify the timing or amount of future repurchases.

A $32.5 Million Charge Kept GAAP EPS Behind Operating Growth

The main divergence in the quarter was between operating income growth of 24% and attributable net income growth of only 2%. SEI recorded a $32.5 million charge in other expense related to the termination of an agreement with Stratos to purchase its Mexico-based subsidiary, NSC. Because the charge was recorded below operating income, it did not affect the reported operating margin but weighed on income before taxes and GAAP net income.

Adjusted diluted EPS rose 24% to $1.64 after the company’s specified adjustments, including the unusual termination charge, related tax effects, and acquisition-related amortization. The lower share count also contributed to the faster adjusted per-share growth.

Management Commentary

CEO Ryan Hicke characterized growth as broad-based and said client relationships were becoming deeper and more strategic. Management emphasized demand for outsourcing, enterprise transformation, professional services, data capabilities, and asset-management solutions. Hicke also noted that year-to-date sales had already surpassed SEI’s previous highest full-year total, although the timing and amount of revenue ultimately generated from those sales events remain dependent on implementation and funding.

Recent Insider Transactions

The 10 most recent insider records provided cover August 5 through September 30, 2026. They include six sale entries and four derivative-security exercise or conversion entries, all reported as direct ownership; several executives reported a conversion and a sale on the same date, but the records do not establish the reason for those transactions.

Across the broader six-month summary, insiders purchased 239,000 shares in 13 transactions and sold 347,609 shares in 17 transactions, resulting in net sales of 108,609 shares. Insiders held 18.76 million shares in total, and net sales represented 0.60% of that amount.

Risks Investors Need to Watch

• Client outflows remain a pressure point. Prior outflows reduced Institutional Investors revenue and operating profit, while LSV recorded $5.3 billion of quarterly net outflows despite positive investment performance.
• Investment Advisors is growing faster than its profit base. Revenue rose 26%, but expenses increased 36% and the segment margin fell five percentage points. Stratos-related amortization was one factor affecting reported profitability.
• Sales events do not immediately equal recognized revenue. SEI reported record year-to-date sales activity, but the timing, funding, and recurring revenue generated from those events remain uncertain.
• Variable compensation can moderate operating leverage. The quarter included an additional $6.4 million incentive compensation accrual tied to year-to-date performance and the outlook for the remainder of 2026.
• Asset-linked results remain sensitive to flows and market values. Total AUM was nearly unchanged sequentially, and weak flows in specific businesses offset some of the benefits from investment performance and new mandate funding.

Summary

SEI’s Q3 2026 results showed faster operating profit growth than revenue, supported by Private Banks leverage, Investment Managers demand, and lower corporate overhead. The $32.5 million Stratos-related charge restrained GAAP net income, while adjusted EPS more closely reflected the improvement in operating performance and the lower share count. The next operational indicators to monitor are the conversion of record sales activity into recurring revenue, Investment Advisors margins, and flows in Institutional Investors and LSV.